March 2, 2011

Verizon Announces Upcoming Tiered Data Plans

An executive with Verizon in a speech Tuesday announced that the company will introduce a new tiered data plan this summer and also hinted at a new version of the iPhone.

Verizon shares fell 2.4 percent on Tuesday after chief financial officer Fran Shammo said a new iPhone would hurt quarterly margins when it arrives.

"There could be some (margin) lumpiness when you launch the phone," said Shammo, speaking at the Morgan Stanley Technology, Media and Telecom conference in San Francisco. "If there happens to be a new one that comes out, that quarter might not look so good (either)."

Shammo did not disclose when the next iPhone might be available. Apple typically launches iPhone models during the summer, coinciding with Verizon Wireless' timeline on its new data plans.

"I would take that comment as a pretty strong signal there's an iPhone refresh coming to Verizon in the third quarter," Credit Suisse analyst Jonathan Chaplin told Reuters.

Verizon's iPhone sales have been strong since it began selling them last month, said Verizon Wireless CEO Dan Mead on Friday.

Chaplin said investors may be concerned that customers who bought the first Verizon iPhone, would be upset if that phone becomes obsolete by summer.

"You'd be worried there'd be a backlash from consumers. What they don't want is for Verizon to be put in a position where it's forced to offer free trade-ins," said Chaplin.

Even if the trade-in wasn't free, Chaplin said it would hurt Verizon's profits.

However, the company's move to tiered pricing was good news for investors, said Chaplin.

Verizon Wireless currently allows unlimited Web-surfing at $30 a month for users of its version of the iPhone. But that will change by mid-summer, according to Shammo.

Verizon Wireless kept the unlimited plan for iPhone customers as it "didn't want to put up a barrier" to consumers who wanted to try out the device on its network, said Shammo.

Shammo added that Verizon Wireless would still manage to report profit margins "in the mid-40 percent range" for full-year 2011.

There are no solid numbers about how many iPhones Verizon has sold. Analysts have used the 60 percent figure to estimate the final figure. Estimates have gone as high as 1 million units based on another estimate that Verizon had 600,000 online pre-orders of the iPhone.